'Anti-China Steel Alliance' Participation Delay Increases Penalty... Korea Pressured Amid US-China Conflict

Unlike the US, EU, Japan, and UK, South Korea Remains Silent on Steel Negotiation Demands
Indirect Pressure Intensifies... South Korea Faces a Crossroads Amid Calls to Join 'China Containment' Efforts

[Sejong=Asia Economy Reporter Kwon Haeyoung] The government’s consideration of joining the U.S.-led 'anti-China steel alliance' stems from the intensifying U.S.-China conflict, with increasing pressure from the U.S. to participate in its efforts to contain China. Although the specific details of the new steel trade agreement have not yet been revealed, the government’s stance is that participation is inevitable, with timing being the only issue. Unlike the European Union (EU) and Japan, which have joined hands with the U.S. to build a containment network around China, the U.S. has been indirectly pressuring South Korea by responding silently to its steel negotiation requests. Some voices express concern that as the U.S. tightens its grip on China across sectors such as semiconductors and steel by partnering with allies, the longer South Korea delays joining the anti-China steel alliance, the greater the cost of tardiness may become.

◆ Carrot for EU and Japan joining China containment = According to the government on the 15th, Jeong Daejin, Deputy Minister for Trade at the Ministry of Trade, Industry and Energy, who has been visiting the U.S. since the 12th, discussed trade issues with the U.S. government, including the issue of participating in 'GASS.' GASS stands for the 'Agreement on Sustainable Steel and Aluminum,' a new U.S.-led steel trade agreement aimed at resolving oversupply and reducing carbon emissions. It is essentially an anti-China coalition formed by allies to exclude Chinese steel.

Currently, the U.S. is in a mood to conclude steel negotiations on the premise of participation in China containment. The U.S. restricted imports of foreign steel based on Section 232 of the Trade Expansion Act in 2018, but agreed with the EU in October this year to lift steel tariffs and establish a new steel trade agreement. Japan and the UK, which are close to concluding steel negotiations with the U.S., are also expected to officially join soon. The steel negotiation initiation document with Japan, which began talks following the EU, already includes language excluding 'China.' It is reported that the U.S. proposed a deal to Japan allowing tariff-free steel exports to the U.S.

An industry official said, "Since the U.S. has opened the door for allies to join the new steel agreement, our government should proactively enter and take the lead in discussions when major allies like Japan and the UK participate."

◆ Will the cost of tardiness increase amid U.S.-China tensions? = While the government is weighing the timing of joining the new steel trade agreement, some in the industry express concerns that the cost of tardiness will increase the longer the declaration of participation is delayed. The EU has already secured the right to export 75% of its average annual exports from 2015 to 2017 tariff-free through negotiations with the U.S., and can export unlimited quantities beyond that with a 25% tariff. Similar terms are expected in negotiations with Japan and the UK. In contrast, South Korea can only export 70% of its average annual exports from 2015 to 2017 tariff-free. This relatively weakens the competitiveness of Korean steel companies in exports to the U.S.

In the mid to long term, if South Korea, as a major steel importer to the U.S., fails to participate proactively in setting the 'rules' of the new trade agreement, it is expected to be difficult to maximize the benefits for Korean companies. The U.S. is likely to grant tariff preferences or impose disadvantages depending on participation in the agreement. According to the U.S. Department of Commerce’s International Trade Administration (ITA), South Korea exported 4.13 million tons of steel to the U.S. from January 2020 to October 2021, ranking as the fourth-largest steel importer to the U.S. after Canada, Brazil, and Mexico. For the Korean government and steel companies, the expansion of the anti-China steel alliance front inevitably represents significant pressure.

Above all, since GASS is not merely a steel agreement but is linked to the U.S.’s efforts to build an Asia-Pacific and Indo-Pacific economic cooperation system aimed at containing China, it is pointed out that more active cooperation with the U.S. amid U.S.-China tensions is necessary. An industry official said, "It won’t be easy for the government to choose between the U.S. and China, but if there is justification for the new steel trade agreement, persuading China is necessary."

This content was produced with the assistance of AI translation services.